If you are a first time homebuyer, the mortgage process can be very confusing due to the variety of mortgage options out there. As your local mortgage broker in Burlington, we have compiled a list of mortgage insurance explanations to help ease this confusion.
What is Mortgage Insurance?
Mortgage insurance, also known as mortgage default insurance, is insurance a homebuyer gets that protects the lender and the investor. You might be wondering why the borrower needs to buy mortgage insurance if it does not protect the borrower or their home. It is beneficial because it can help you purchase a home at a quicker rate, and could give you a lower down payment. This means it could give you more of an affordable option when buying a home.
Different Types of Mortgage Insurance
There are two different types of mortgage insurance: conventional mortgages and high ratio mortgages. Mortgage insurance is needed on a conventional loan if the borrower pays a minimum 20% down payment. A high ratio mortgage is when the borrow pays less than 20% on a down payment. Insurance is required on most all high ratio mortgages, but it is not always required on conventional mortgages; it all depends on how much the borrower can pay upfront towards their down payment.
Mortgage insurance is NOT the same as homeowner insurance or mortgage life insurance. Homeowner insurance specifically protects the homeowner from any damages to the home such as from natural disasters or theft. Mortgage life insurance is an insurance that pays off any mortgage debt if the borrower is deceased or has a long-term disability. These insurances protect the borrowers—mortgage insurance does not.
Get Started Today!
If you are looking for a second mortgage in Burlington, or are wanting more information on the differences in mortgage insurance, contact your local broker today at 289-337-4029.